Google parent Alphabet posted 25 percent higher revenue in the third quarter, but its search engine is growing more slowly. According to the company, queries in Google’s AI Mode bring in less than traditional searches.
Google parent Alphabet announced its results for the third quarter of 2026 on Wednesday evening. Revenue rose to 127.6 billion dollars, 25 percent more than a year earlier. Search, Google’s biggest source of income, grew by twelve percent to just over 63 billion dollars. In the second quarter, growth was still seventeen percent.
Google AI Mode earns less
Philipp Schindler, Chief Business Officer of Google, blames part of that slowdown on AI Mode. The slower revenue growth stands out, as the number of queries is growing at its fastest pace in five years.
Schindler cited exchange rates as the main cause, followed by shifts among advertisers in retail and media. He then added: “The strong growth in the number of queries in AI Mode had an impact, because we saw that AI Mode monetized less.”
That is a striking admission. Google is forcing AI Overviews and AI Mode on its users, whether they want them or not. CEO Sundar Pichai says Google first wants to build the best search experience and only then think about revenue, as with the shift to mobile ten years ago. That AI search results are demonstrably less accurate, and by definition are interpretations of a source, runs counter to that. Ironically, Google is now feeling the financial consequences of that choice itself.
More ads, then
Google wants to make up the difference in the only way it knows: with more ads. “Our ad experiments show promising results,” says Schindler. Google will now show ads in AI Overviews and AI Mode to more users and for more queries.
In the United States, ads will also appear with follow-up questions in AI Mode. Ads in AI Mode are also coming to ten other countries, including Australia, Canada and India. Brazil, Mexico and the United Kingdom follow in the fourth quarter. Belgium and the other EU member states are not on that list.
According to Schindler, users do not mind ads in AI Mode. He says sponsored products are already clicked on about as often as regular product results. He also says most queries in AI Mode are new queries that Google would not otherwise have received.
Cloud division doubles revenue
The cloud division brought in 30.7 billion dollars in revenue, 103 percent more than a year earlier, and earned 11.1 billion dollars in operating profit from it. That is more than three times as much as last year. YouTube’s advertising revenue rose by nine percent to 11.2 billion dollars, and subscriptions such as YouTube Premium and Google One brought in eleven percent more, at 14.3 billion dollars. Ads that Google places on partner sites remained virtually stable at 7.5 billion dollars. The side projects, including robotaxi service Waymo, ran up a loss of 2 billion dollars.
Alphabet made an operating profit of 40.6 billion dollars. That is 30 percent more than a year earlier. Net profit fell by 24 percent to 26.5 billion dollars, due to an impairment of 8.7 billion dollars on investments, mainly on its stake in SpaceX. A year earlier, those investments still yielded a profit of 10.7 billion dollars. In the third quarter, Alphabet invested 51.4 billion dollars, mainly in data centres and servers for AI, and as a result spent 9.1 billion dollars more than it brought in.
More than 500 billion dollars in market value wiped out
It has become a tradition: a tech company presents huge profits and growing revenue, after which its share price plunges. Intel experienced it today, and Alphabet fares no differently. On the stock market, the share lost 12.64 percent on Thursday. It closed at 283.82 dollars, against 324.89 dollars a day earlier.
That wiped out more than 500 billion dollars in market value: an immense evaporation. Besides the slower growth in search, high AI spending also weighed on the share price. Chief Financial Officer Anat Ashkenazi expects investments to rise considerably further in 2027 and search to grow more slowly again in the fourth quarter, partly because of exchange rates.